Key Findings Details

Framing Social Security Reform: Behavioral Responses to Changes in the Full Retirement AgeLuc Behaghel and David Blau
WP 2010-243

We use the 1983 Social Security reform that increased the Full Retirement Age (FRA) from 65 to 66 as a quasi-experiment to provide evidence on framing effects in benefit claiming and retirement behavior. The increase in the FRA is effectively a benefit cut, but it was “framed” as an increase in the age at which the normal retirement benefit is received.

Although one cannot fully rule out alternative behavioral explanations such as social norms or reliance on SSA "advice," the latter explanations seem at odds with the fact that workers with higher cognitive ability respond more to the FRA change.

We develop a simple labor supply model with reference dependence that can explain the results. The model implies that framing a reform as a change in the reference point magnifies the impact, whereas framing it as a benefit cut dampens the response. The model has potentially important implications for framing of future Social Security reforms.